consideration
19 The issue on appeal is resolved by determining the proper construction of s 41(1) of the Bankruptcy Act and, specifically, s 41(1)(b)(ii), given that two final judgments or final orders were relied upon for the issue of the bankruptcy notice in the present case.
20 In this connection the relevant provision posits three requirements:
the judgments or orders must be final judgments or final orders;
those final judgments or final orders must be of the kind described in s 40(1)(g); and
taken together those final judgments or final orders must be "for an amount of at least $2,000".
21 The Bankruptcy Act does not define the expressions "final judgment" and "final order" as used in s 40(1)(g) and s 41(1). Historically, in bankruptcy law, a rigid distinction has been drawn between a "final judgment" and a "final order". In context, a "final judgment" is strictly construed to mean a final judgment "obtained in an action". Thus, in Clyne v Deputy Commissioner of Taxation (NSW) (1983) 48 ALR 545 at 547-548 Gibbs CJ (with whom the other members of the High Court agreed) said:
A final judgment within the meaning of the provisions of the Bankruptcy Act has been held to mean a judgment obtained in an action by which the question whether there was a pre-existing right of the plaintiff against the defendant is ascertained or established: Opie v Opie (1951) 84 CLR 362 at 372. In other words it is a judgment which finally disposes of the rights of the parties: see Licul v Corney (1976) 8 ALR 437 ; 50 ALJR 439 at 444. The fact that a judgment is subject to appeal or that it may later be set aside or become inoperative does not mean that it is not final: Re Hanby; Ex parte Flemington Central Spares Pty Ltd (1967) 10 FLR 378.
22 In a technical sense, an "action" is the invocation of a court's jurisdiction by writ and a "proceeding" is an invocation of a court's jurisdiction by other process: Herbert Berry Associates Ltd v Inland Revenue Commissioners [1977] 1 WLR 1437 at 1446. Accordingly, in Re A Bankruptcy Notice; Ex parte The Official Receiver [1895] 1 QB 609 a bankruptcy registrar refused to issue a bankruptcy notice for a debt, represented by unpaid costs ordered to be paid in proceedings successfully taken by the Official Receiver, as trustee in bankruptcy, to set aside an assignment of property. The registrar refused to issue the bankruptcy notice on the ground that an order upon motion in bankruptcy was not a final judgment in an action for the purpose of s 4(1)(g) of the Bankruptcy Act 1883 (Eng) (the 1883 Act) (which provided for the issue of bankruptcy notices). The Court of Appeal dismissed an appeal from that refusal. Lord Justice Rigby said (at 611):
No doubt this order is a final one, and it is very like a judgment. But it is certainly not a judgment in an action, and, according to the former decisions of this Court, the "final judgment" spoken of by sub-s. 1(g) must be a judgment in an action.
23 This case was one in a series of cases, of which In re Chinery; Ex parte Chinery (1884) 12 QBD 342 is usually taken as the starting point, in which this distinction was strictly observed. These cases, and the history of the distinction, are discussed in detail in Abigroup Limited v Abignano (1992) 39 FCR 74 at 80-81; see also the analysis Re Pannowitz; Ex parte Wilson (1975) 6 ALR 287 at 289-291 and Re Smith; Ex parte Chesson (1992) 106 ALR 359 at 362-364. In Pannowitz Riley J (at 290) described these cases as having been "laid to rest" by the enactment of the Bankruptcy and Deeds of Arrangement Act 1913 (Eng) which, by s 16, effectively abolished the distinction between a "final judgment" and a "final order" for bankruptcy purposes by providing that s 4(1)(g) of the 1883 Act should have effect as if:
… references to final orders and to sums ordered to be paid were included in the references to final judgments and judgment debts respectively wherever the same occur, and a reference to the proceedings in which the order was obtained was included in the reference to the action in which the judgment was obtained.
24 So far as Australian federal bankruptcy legislation is concerned, the rigid distinction between a "final judgment" and a "final order" is really one of historical interest only. The first federal enactment was the Bankruptcy Act 1924 (Cth). In that legislation the cause for debate about the distinction between a "final judgment" and a "final order" was eliminated at the outset because provision was made for the issue of bankruptcy notices based on a "final judgment" or "final order". Section 52(j) of the 1924 Act (the precursor to s 40(1)(g) of the Bankruptcy Act) provided:
A debtor commits an act of bankruptcy in each of the following cases:
…
(j) If a creditor has obtained a final judgment or final order against him for any amount, and execution thereon not having been stayed, has served on him in Australia or, by leave of the Court, elsewhere, a bankruptcy notice under this Act, and the debtor does not, within seven days or such time as is prescribed after service of the notice in Australia, or within the time limited in that behalf by the order giving leave to effect the service elsewhere, either comply with the requirements of the notice, or satisfy the Court that he has a counter-claim, set-off, or cross demand which equals or exceeds the amount of the judgment debt, and which he could not set up in the action or proceeding in which the judgment or order was obtained:
Any person who is for the time being entitled to enforce a final judgment or final order for the payment of money shall be deemed a creditor who has obtained a final judgment within the meaning of this paragraph ; and a final judgment or order against a married woman shall be deemed to be a final judgment or order within the meaning of this paragraph, notwithstanding the fact that no execution can issue at law on the judgment or order ;
25 In Re Black; Ex parte Jeffery (1932) 4 ABC 157 (a case concerning a bankruptcy notice issued on an unsatisfied order for costs made in a motion for a new trial in divorce proceedings) Lukin J, after referring to the historical position under English bankruptcy legislation, said (at 160):
It will be noted that s. 52(j) … contemplates a final order not only in an action but also in a proceeding. A proceeding may mean something as distinct from an action or any step thereunder in which final orders are made for the payment of money. It may also mean a step in an action, in which proceeding a final order is made for the payment of money. Sec. 52(j) does not of itself impose any restricted meaning on the word "proceedings" in the amendment, and there appears to be no reason for doing so.
In there referring to "the amendment" his Honour can be taken to have been referring to the amendment to the 1883 Act which incorporated the references to "final orders" and to "sums ordered to be paid" in s 4(1)(g) of that Act.
26 In the Australian context the focus of case law, for the purposes of s 40(1)(g) and s 41(1) of the Bankruptcy Act, has been the requirement for there to be "judgments" and "orders" that are "final" rather than the distinction between "judgments" and "orders" themselves. The provisions of s 40(3) of the Bankruptcy Act give, in a number of respects, an extended interpretation to "final judgment" and "final order" as used in s 40(1)(g) (and hence to the corresponding expressions used in s 41(1)) by deeming certain awards, judgments and orders to be a "final judgment" or a "final order". This has eliminated a number of the controversies that might otherwise have arisen in the absence of those provisions: see, in particular, ss 40(3)(a), (b) and (f). Importantly, in the present appeal, the issue of "finality" itself does not arise.
27 As noted, the appellant placed reliance on the following passage in the judgment of Riley J in Re Munson (at 482) as supporting its primary contention:
A bankruptcy notice must require the debtor to pay "in accordance with the judgment": s. 41 (2) (a) (i). In the case of a Supreme Court judgment interest is payable from the date when the judgment takes effect on so much of the money of which the judgment orders payment as from time to time remains unpaid: Supreme Court Act, 1970, s. 95 (1); and is a debt necessarily and inevitably attached to the judgment debt: Re Clagett; Ex parte Lewis (1887) 36 WR 653. To pay the judgment debt "in accordance with the judgment" is to pay the amount for which judgment was recovered with the legal interest attached to it by statute: Re Cooper [1911] 2 KB 550 at 554; and there is no doubt that a bankruptcy notice may require the payment of statutory interest. "The creditor is entitled to have the amount of the interest added to the judgment debt so that the debtor may be informed by the notice that he cannot comply with the notice without paying the interest on the debt": Re Lehmann; Ex parte Hasluck (1890) 7 Morr 181 at 183 per Cave J. But a bankruptcy notice can "only demand payment of that which the judgment creditor can enforce payment of", and cannot issue for a sum of money for which execution cannot issue: Re Follows; Ex parte Follows [1895] 2 QB 521 at 525 per Vaughan Williams J.; cf. Re O'Keefe; Ex parte Australian Factors Ltd. (1963) 19 ABC 101 at 103-104. It is to be inferred from s. 41 (5) and (6) that a bankruptcy notice must specify a sum as "the amount due to the creditor"; and if he demands payment of interest the creditor must himself calculate, and must specify in the bankruptcy notice, the amount required to be paid: Re Davis; Ex parte Deputy Commission of Taxation (1963) 19 ABC 100; Re O'Keefe (1963) 19 ABC 101.
28 In Re Munson a question had arisen as to the validity of a bankruptcy notice where the amount of post-judgment interest under s 95 of the Supreme Court Act 1970 (NSW), which had accrued at the date of issue of the bankruptcy notice, was understated in the notice itself. It was held (at 483) that this understatement of accrued interest would not invalidate the bankruptcy notice. In the course of his reasons, Riley J addressed the requirements of s 41 of the Bankruptcy Act in its form before the amendments introduced by the Bankruptcy Legislation Amendment Act 1996 (Cth) (on which the present s 41 is based). In that form, s 41(2)(a) provided that the prescribed form of bankruptcy notice should require the debtor to pay the judgment debt or sum ordered to be paid "in accordance with the judgment or order". That provision no longer exists. Section 41(2) now provides that the bankruptcy notice must be in accordance with the form prescribed by the Regulations. In referring to the requirements of s 41(2)(a) in its former guise, Riley J reasoned that, by use of the words "in accordance with the judgment or order", a bankruptcy notice may include, and require the payment of, statutory interest as part of the debt due under the bankruptcy notice. However, the case itself was not dealing with the meaning of "final judgment" or "final order" as used in s 40(1)(g), and as currently used in s 41(1), of the Bankruptcy Act.
29 In Re Manion, after referring to the passage in Re Munson quoted above, Lockhart J (at 273) said:
Although interest is necessarily and inextricably attached to the judgment debt, in my opinion it does not itself answer the description of the sum due by the debtor to the petitioning creditor under the final judgment.
30 It is clear from that case, as indeed it is clear from Re Munson itself, that there is a distinction between the amount of the "final judgment" or "final order" or the balance due thereunder, on which the bankruptcy notice is based, and post-judgment interest that may be included in the bankruptcy notice as part of the debt identified therein as being due to the creditor who has sought the issue of that notice: Re Manion at 274; Re Munson at 483. These cases do not assimilate the imposition of post-judgment interest into the "final judgment" or "final order" referred to in s 40(1)(g) and s 41(1). Indeed, in principle, it could not be the case that a liability for interest, imposed separately by statute post-judgment (such as s 100(7) of the Magistrates' Court Act) could assume the character of a "final judgment" or "final order" obtained from a court, in accordance with the construction placed on those expressions judicially. The discussion of the meaning of "final judgment" and "final order" in the cases serves to underline the distinction between (a) a final judgment (or final order) as an operative judicial act in an action (or proceeding) where a pre-existing right is ascertained or established, and (b) post-judgment interest, as an entitlement which only arises by imposition of statute once the final judgment is given or a final order is made by a court.
31 The wording of s 40(1)(g), as extended by s 40(3), does not otherwise throw light on the meaning of the expressions "final judgment" and "final order" as used in s 41(1) of the Bankruptcy Act. In particular, the reference in the final paragraph of s 40(1)(g) to the debtor satisfying the Court that he or she has a counter-claim etc "equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be …" does not signify that the expressions "final judgment" and "final order", respectively, have an extended meaning beyond their judicially determined meaning so as to include, in each case, post-judgment interest.
32 The appellant's position in this regard is not advanced by recourse to the prescribed form of bankruptcy notice. As a matter of general principle, the form of the bankruptcy notice, as prescribed by the Regulations, could not determine the meaning of the expressions "final judgment" and "final order" as used in s 40(1)(g) and s 41(1) of the Bankruptcy Act: Master Education Services Pty Limited v Ketchell (2008) 236 CLR 101 at [39]; Webster v McIntosh (1980) 32 ALR 603 at 606; The Great Fingall Consolidated Limited v Sheehan (1905) 3 CLR 176 at 184. In any event, there is no reason to doubt that the expressions "final judgment" and "final order" as used in reg 4.01 (which deals with applications for bankruptcy notices) take their meaning from s 40(1)(g) and s 41(1) of the Bankruptcy Act: s 13 Legislative Instruments Act 2003 (Cth). Moreover, the prescribed form of bankruptcy notice plainly draws a distinction on its face between the amount of the "judgments or orders" and, if claimed, the "interest accrued since the date of judgments or orders".
33 Similarly, the appellant's position is not advanced by recourse to the definition of "judgment debt" in s 3 of the Judgment Debt Recovery Act 1984 (Vic). That Act is concerned with the payment of judgment debts by instalments. Section 3 of the Act defines a "judgment debt" as "the amount of money recoverable or payable under and in respect of a judgment". The appellant submits that the definition is wide enough to include post-judgment interest. That submission can be accepted: see Cahill v Howe [1986] VR 630. However, the only relevance of that definition is in relation to the recovery of judgment debts as provided for by that particular piece of State legislation. The definition of "judgment debt" in that Act could not possibly be used to construe the expressions "final judgment" or "final order" as used in the Bankruptcy Act, or otherwise illuminate their meaning. In any event, as the decision in Cahill makes clear, post-judgment interest is captured in the definition of "judgment debt" for the purposes of that Act because of the words "in respect of a judgment": see the discussion at 633-634. If anything, those words stand as an acknowledgement of a distinction between a judgment given or order made by a court, and the separate statutory imposition of interest "in respect of" such a judgment or order.
34 Finally, the appellant's position is not advanced by reliance on cases that hold that account can be taken of accrued post-judgment interest to support the presentation of a petition under s 44(1) of the Bankruptcy Act: see In re Henry Wilson (1877) 3 VLR 95 at 96; Re Merrington; Ex parte Monds & Affleck Limited (1929) 2 ABC 154. The requirements of s 44(1) of the Bankruptcy Act are clearly distinct from the requirements of s 41(1) in that the statutory minimum amount for the purposes of s 44(1) is in respect of the "debt" owing by the debtor to the petitioning creditor, not the "final judgment" or "final order" on which a bankruptcy notice is required to be based. It is trite that the "debt" relied on to support a creditor's petition need not be one arising from a judgment or order; nor is there any requirement that a creditor, who petitions for a sequestration order based upon an act of bankruptcy for which s 40(1)(g) provides, rely upon the debt claimed in the bankruptcy notice giving rise to the act of bankruptcy: Emerson v Wreckair Pty Limited (1992) 33 FCR 581 at 588. Indeed, the relevant act of bankruptcy can arise from any of the circumstances set out in s 40(1). Thus the operation of s 41(1) is independent of the operation of s 44(1) of the Bankruptcy Act. Each section should be seen as imposing statutory minimum amounts in respect of two conceptually different conditions, one for the issue of a bankruptcy notice and the other for the presentation of a creditor's petition.